Retail Investor: The New Kid On The Block

The markets are always exciting when stock prices gain but they can be said to be in a frenzy mood when you have more than 1,000 listed shares doubling in one year. What is eye-popping in this market rally is the rapid increase in participation by retail investors. In this cover story, Yogesh Supekar highlights the global trend that is indicative of a larger shift in ‘who dominates the market flows’ while also discussing the implications for portfolio returns

- Yogesh Supekar

CDSL, one of the only two security depositories in India, got listed on the bourses in 2017. Since its listing, the stock did not do much for almost three years. CDSL, with a premium of over 80 per cent over its issue price, was listed at ₹250 per share and by the end of June 2020, the stock was trading at ₹274 per share. The rally in CDSL had already begun post-March correction and the stock has become a four-bagger (4x) in 14 months since the pandemic-led market correction – trading in excess of ₹832 per share. As a leading securities depository in India, CDSL earns revenue by charging annual issue fees to corporates and also makes money by charging account maintenance fees, user facility charges, and transaction fees to depository participants (DPs.)

As an ever-increasing number of customers use the CDSL facilities, the company stands to gain – it is a simple and straightforward revenue business model. Recently with the advent of the pandemic-led lockdowns, there has been a huge surge in new Demat accounts that have led to increased profitability for CDSL, which is simply getting translated into soaring stock price for CDSL. Says Mohit Punjabi, who is an active investor and trader in the markets, “Last year when the lockdown was announced and markets crashed, I was looking for stock ideas that would benefit from the lockdown. After the correction, one thing that I noticed was that all my friends had become active in the equity markets. Suddenly everyone wanted to invest as they perceived that a correction of more than 20 percent in the Sensex and almost 50 per cent in the majority of the BSE 500 stocks was a ‘once in a lifetime’ opportunity. “